David Wright, secretary-general of the International Organization of Securities Commissions, has reiterated calls for a "global arbiter" to settle cross-border rulemaking disputes, as long-awaited reforms to the financial sector begin to be implemented.

David Wright

Speaking at the World Exchange Congress in London yesterday, Wright urged delegates to "start to think about the institutions that we need at a global level. They include global enforcement bodies and dispute mechanisms".

"We need to determine who is going to be the global arbiter," he said.

The idea of a global referee for settling cross-border disputes has come to the fore as regulators deal with the G20 group of countries' post-crisis reform agenda. These include reforms to the over-the-counter derivatives market, the rationalisation of international accounting standards and the implementation of capital rules outlined under Basel III.

Many practitioners expect international regulatory disputes to increase as complex global rules are implemented. Foremost among fears is the overlapping of rules across multiple jurisdictions – a process known as extraterritoriality. Global regulators have been encouraged to adopt a framework of "mutual recognition" of one another’s rules, to prevent firms that operate in multiple countries being regulated by two sets of rules.

However, Wright said yesterday: "Some will say that mutual recognition schemes will solve cross-border disputes, but I wouldn't agree. The complex matrix of global financial markets and institutions is pushing us towards global institutions with global powers."

Iosco, which represents around 95% of all national regulators, has taken on a more prominent role in recent years by being handed the mandate to ensure global co-ordination in the implementation of the G20's reform agenda. However, it is primarily a standards setting body and has no enforcement powers.

Wright caused a stir in December, when during a speech in Washington he called for the creation of an institutional framework with “some enforcement authority, binding disputes settlement and sanctioning possibilities” that would ensure global standards are consistently applied.

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Many practitioners expect Iosco to become more prominent and potentially more powerful, even if a super-regulator and multilateral dispute mechanism is a distant prospect.

Speaking to Financial News last month, Anthony Belchambers, chief executive of the Futures and Options Association, which has campaigned for greater regulatory co-ordination, said: “Iosco needs to have a mandate to build out its powers and to be more interventionist, similar to the European Securities and Markets Authority. If it receives that mandate then that would be tremendous progress.”

During his speech yesterday, Wright added that there needed to be "much stronger coordination among global regulators" and for "much more sophisticated economic analysis before the introduction of regulation".